The ‘social’ in ESG – moving from concept to practice

Once, the critical challenge in mining was finding an economically accessible resource to develop. Recently, however, the key challenges to mineral developments have not come from the area of traditional technical risks of resource grade and price sensitivity, but rather from environmental, social and governance (ESG) factors, ultimately impacting supply chains.

According to RPMGlobal executive consultant Diane Dowdell, ESG issues have historically been less dependent upon market conditions – traditionally, when a resource becomes scarce or the economics improve, the resource becomes more viable to mine.

“However, successful project development and execution is now based upon understanding and effectively managing complex ESG risks, which require a broader suite of technical skills,” she said.

“There is a range of critical minerals integral to the clean energy transition, such as copper, graphite, lithium and cobalt, which are essential to combat the effects of climate change. But the mining of these resources is currently constrained by complex risks, including human rights issues, land accessibility, environmental aspects, and transparency and governance.

“Without a robust understanding of the ESG risks associated with a project and a clear risk management strategy, it is difficult to provide an efficient pathway to develop a mineral resource.”

More importantly, these minerals are part of evolving supply chain transparency requirements. End users of mineral commodities want their supply chains to demonstrate that they are free from labour and human rights issues with robust environmental management programs.

Dowdell said native title landholders and Indigenous communities, local communities, investors and other stakeholders are becoming increasingly sceptical of unsubstantiated claims of mining benefits.

“These social and community issues are impacting the ability of the minerals industry to meet critical metal supply requirements, as well as impacts upon the broader reputation of mining companies and their ethics,” she said.

“Moving forward, access to capital will be increasingly constrained by ESG related issues, increasing the importance of robust and workable solutions generated for the unique challenges presented by each mineral development.”

Social impacts of mining include:

• Land-use conflicts between cultural and other economic activities
• Community impacts associated with an influx of workers into communities can cause conflict over scarce resources
• Cultural challenges from different personal values

Governance risks in early exploration include:

• Perceptions associated with access to political and government officials and payments
• Community development programs that create concerns around transparency

“A company’s ESG strategy starts from the day it wishes to begin exploration,” Dowdell said.

“From the moment that a drill rig is mobilised to a drilling location, the company will likely cause social impacts.

“ESG risks are broader than regulations and permits, as even companies that meet compliance are exposed to substantial ESG risks. Integrating ESG into your earliest activities and core strategy is integral to building the necessary relationships and frameworks to ensure that the company can run successful exploration and development programs.

“At RPMGlobal, our extensive network of executive-level consultants who work across dedicated ESG disciplines develop collaborative and bespoke solutions for our clients to understand and address their ESG risks.

“We work within the boardroom and C-suite of exploration and mining companies to delve into their business’s true nature and understand the culture and values. This assists our team in mapping out the material risks unique to the business and provide support in developing the necessary action plans to address these risks.

“Our consultants intimately understand the range of global ESG frameworks that apply to the mining industry, so we can best support our clients in navigating the development of a coherent plan.

“Along with access to traditional technical skills, knowledge of financial markets and data management tools and software, RPMGlobal uniquely brings together the strategy, the technical knowledge and the tools to deliver advisory services for a more sustainable minerals industry.”